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Best Small Business Loans and Grants for Minorities

Minority business owners sometimes find it difficult to secure funding from traditional financial institutions for reasons that range from limited credit history to illegal discriminatory lending practices. Minority business owners may find more success when moving away from traditional banks and toward online lenders.

Financially Reviewed by Somer G. Anderson, CPA on 6.1.2021

At a glance — many small business owners don’t know where to turn for guidance and reliable information about loans and grants for minorities. Many minorities continue to feel marginalized and at a disadvantage when it comes to applying for a loan for their small business. Our experts have compiled this comprehensive guide to give minority business owners all the information they need to make an informed decision about the best small business loans and grants for minorities.

The Best Small Business Loans for Minorities

The table below provides a summary of the top small business loans for minorities.

Lender

Best for

Minimum Credit Score

Minimum Time In Business

Min. Annual Revenue

Loan Amount

Interest Rate

Fora Financial 

Fora Financial review

Merchant Cash Advance

Around 500

Six months

$144,000

From $5,000 to $500,000

One-time factor rate

Fundbox

Full Fundbox review

Credit line

-

3 months

-

$150,000

10.1% to 79.8%

Credibly

Credibly Review

SBA loans

620+ personal credit score for SBA loans

2+ years in business for SBA loans

Not specified

Not disclosed 

APR range for SBA loans

Starting from 6.99%

BlueVine

Full Bluevine review

Invoice factoring

600

-

100,000

$5 million

0.25%-1.7% per week

Kabbage

Full Kabbage review

Credit line

-

1 year

$50,000

$250,000

APRs between 24% and 99%

OnDeck

Full Ondeck review

Term loan

600

1 year

$100,000

$250,000

From 11.89% APR

Top Small Business Loans for Minorities - An In-Depth Look

1. Fora Financial - Best for Merchant Cash Advance

It is a sad truth that minorities often find it difficult to be approved for loans. That is why merchant cash advances are a great option for minority entrepreneurs. 

Upon receiving a merchant cash advance, you will get a lump sum and remit a percentage of your business’ credit card transactions. It is quite different from a traditional loan but just as useful.

The remittance is tailored to your business, which makes it easier to manage.

Pros

Cons

  • No set terms
  • No collateral necessary 
  • Loans between $5,000 and $500,000
  • No restrictions on use
  • Business be operational for six months before an application
  • $5,000 minimum in credit card sales

 

Fora Financial does not restrict how you are allowed to use the funds you’ve received, so you can enhance your business however you see fit. Read the full Fora Financial review.

2. Fundbox - Best for Line Of Credit

Fundbox offers business revolving lines of credit and one-time payment term loans, both with limits up to $150,000.

With a revolving line of credit, you can choose between a 12- or 24-week repayment program each time you draw. The term loans have a 24- or 52-week repayment plan with no origination fees or prepayment penalties applicable to them.

Fundbox qualifying requirements are that: 

  • You should be willing to provide some basic business details so their system can gain some insight into your business 
  • You should have a business bank account that reflects at least two months of activity in any supported accounting software or at least three months of business transactions 
  • Your business should operate in one of the 50 states or one of the following supported US territories: Guam, Northern Mariana Islands, American Samoa, the US Virgin Islands, and Puerto Rico
ProsCons
  • Quick outcome turnaround times
  • Line of credit revolves, so constant access to cash
  • They look at your business, not you
  • Expensive financing

Fundbox, in our opinion, is a funding option worth considering. Read full Fundbox review.

3. Credibly - Best for SBA Loans

SBA 7(a) loansmade by qualified lendersare loans guaranteed by the U.S. Small Business Administration (SBA), a federal entity founded in 1953 to promote small business growth. This loan type can be used to provide up to $5 million in capital funding. 

Maximum repayment terms span from 10 to 25 years, and interest rates charged on 7(a) loans are some of the lowest available. 

To qualify, you must:

  • Be officially registered as a for-profit business
  • Have fewer than 500 employees
  • Show less than $7.5 million revenue on average per year for the last three years
  • Have a net business income of under $5 million (after taxes and excluding carry-over losses)
  • Have an actual net worth of less than $15 million
ProsCons
  • One-third of SBA loans go to minority-owned businesses
  • Less costly financing
  • Government backing
  • Longer approval times
  • Slower access to funds

Credibly loans allows minority small business owners to apply more of their profits toward business growth rather than debt repayment due to lower interest rates. Read full SBA Loans review.

4. BlueVine - Best for Invoice Factoring

BlueVine is an online lender that offers short-term loans and lines of credit of up to $250,000 with a one-year repayment term or invoice factoring up to $5 million for monthly invoices.

To qualify, you’ll need:

  • A 600 credit score
  • To show annual business revenue of at least $100,000
ProsCons
  • Online application
  • Less information to be provided
  • Fast application outcomes
  • Funds are more quickly available
  • Expensive funding
  • Limited financing options

While you get speedier application outcomes and quicker access to your SB funds, you’ll end up paying more with BlueVine than with a conventional lender.

We’ve also found that BlueVine often stops providing certain products when they need to concentrate on interventions like the Paycheck Protection Program (PPP), so check the product availability before applying. Read full BlueVine review.

5. Kabbage - Best for Invoice Factoring

Kabbage, has currently placed their lending products on hold, but you can join a waitlist and ask them to contact you once a certain product becomes available again. Kabbage usually offers flexible business lines of credit up to $250,000 with terms of 6, 12, or 18 months to repay.

Their funding eligibility requirements are:

  • Trading at least one year 
  • Revenues of $50,000 per year or $4,200 per month over the preceding three months
  • Must have a checking account
  • Should have a tax ID number
  • Conducting business in any of the 50 US states or US territories
ProsCons
  • A single monthly fee, which includes interest, admin, and origination
  • No minimum credit score
  • Don't consider business credit score
  • Quick funding
  • Consider owners that have declared bankruptcy once, at least one year from discharge
  • High cost of finance
  • Personal guarantee required
  • A hard pull on personal credit once finance offer accepted

With Kabbage, check funding availability before applying. Read full Kabbage review.

6. OnDeck - Best for Short-Term Loans

OnDeck offers revolving credit lines from $6,000 to $100,000 and business term loans of $5,000 up to $250,000. Credit lines have a 12-month repayment term, while you can repay term loans in up to 18 months.

To qualify, you must have:

  • Been in business for at least 12 months
  • A business bank account
  • A credit score of 600
  • Annual business revenue of $100,000
ProsCons
  • Easy application process
  • Quick access to funds
  • More straightforward qualification process than bank or SBA loans
  • Products meet a wide range of funding needs
  • Funding can be costly
  • More frequent repayments required (daily or weekly)
  • A lien is placed on business assets, and a personal guarantee is required

OnDeck is considered an excellent option for minority business owners who need capital for a variety of business needs. Read full OnDeck review.

Who is Eligible for Minority Business loans?  

The term “minority” is not often used together with small business financing. Rather financial institutions and organizations (including the SBA) tend to use the term “disadvantaged” or specify particular minority groups that are eligible for special consideration in relation to the lending process. There might be certain independent groups that provide funding for particular minorities, however, most of the funding that is available is more vague. 

The majority of federal programs define socially disadvantaged individuals as follows:

People who have “been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities.”

This disadvantage has to have been outside an individual’s realm of responsibility.

People within specific groups might also be eligible. This makes the assumption that the following groups of individuals are socially disadvantaged; Hispanic Americans, Black Americans, Native Americans, Subcontinent Asian Americans, and Asian Pacific Americans. The SBA can also nominate other groups.

Business Grants Vs. Loans for Minorities: What's the Difference

The main difference between loans and grants is that the former is repayable while the latter isn't. Although this is the leading distinction between the two options, minority small business owners should be aware of other differences.

Only small businesses operating in certain locations and industries may qualify for specific grants. Potential lenders focus on the business's financial health and its ability to repay the loan.

From requesting bank statements, business plans, and other documents, SB owners may find that loan applications require much more information than grants. Grantors, though, tend to take more time to approve applications and disburse funds than lenders do.

Finally, private lenders and financial institutions offer loans, whereas government agencies and establishments typically provide grants.  

Recommended Reading: Commercial Real Estate Loans

Small Business Grants for Minorities

As a minority small business owner, there are several other ways to obtain funding that doesn’t necessarily have to be repaid. The following are some examples of minority business grants:

1. Grants.gov

Grants.gov doesn’t only offer grants to minority-owned businesses. Yet grants.gov is an excellent way to discover grants that apply to your niche industry and specific eligibility. Overall this federal run agency provides application information, guidelines about eligibility, and target dates for more than 1,000 small business grants. 

All federal government agencies providing minority business grants will advertise their information on grants.gov. Minority-owned businesses may wish to narrow down their loan search by looking for categories such as “small business” or more specific categories such as “nonprofits” or “Native American tribal organizations”.

2. The National Association for the Self-Employed (NASE) Growth Grants Program

NASE provides the Growth Grants Program which lets members apply for grants to assist with the growth of their business. These micro-grants can be worth as much as $4,000 a year. You need a NASE membership to be eligible. NASE doesn’t only offer small business grants, yet their program is tailored to small businesses who can’t necessarily find different financing methods. 

NASE provides these grants on a monthly basis and they review applications quarterly.

3. Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT)

If you have narrowed down your specification to minority business and development grants, you probably want to begin with the SBIR or SBIT programs. These government programs offer business funding opportunities for small businesses who are involved in innovative development and research. 

To be eligible you must have an American-owned and independently operated, for-profit small business. The main researcher must be employed by your business. Also, your business must have up to 500 employees. 

4. Rural Business Development Grants

If you run your business in a rural area, you should look at the Rural Business Development Grant Program run by USDA. You can apply for minority small business grants, in this program, for between $10,000 and $500,000.

This program is available to businesses that operate in rural regions that have a population of under 50,000 people. Furthermore, grant money needs to go towards projects that will help your town or rural area. 

5. USDA Water & Waste Disposal Loan & Grant Program

The USDA Water and Waste Disposal Loan and Grant Program assist business owners (minority business owners and more) who can’t get access to traditional business financing options. This program offers both business loans and grants. 

To be eligible for this grant program, your business must be related to water or waste disposal in a rural area or town with a population of under 10,000 people. 

Recommended Reading: Best Unsecured Business Loans of 2021

 Frequently Asked Questions (FAQ)

1. What qualifies as a minority-owned business?

A business is generally deemed to be minority-owned if it’s at least 51% operated and owned by individuals of specific ethnicities. For instance, to be deemed a minority-owned business in New York, business owners have to be, Hispanic, Black, Asian-Indian Subcontinent, Asian-Pacific, Alaskan Native, or Native American.

2. How do I qualify for a minority business loan? 

Minority-owned businesses are businesses with 50% or more ownership by Hispanic, African- American (or Black), Native American, Asian, or other ethnic or racial groups.  

A certification stating that your business is minority-owned might require you to qualify for specific minority business loans or programs.

3. Can I get a minority business loan with bad credit?

Being a minority business owner has its own difficulties when it comes down to applying for small business loans. If you have poor or bad credit, things can be even more challenging. Yet, don’t give up. There are still many lender options that may be able to help you obtain funding for your business. To begin with there are alternative lenders that may have less rigid requirements than traditional lenders. There are also loans that are designed specifically for minority business owners with bad credit. 

4. Are there loans for new minority-owned businesses?

Funding alternatives may be limited for small businesses that have less than one year in operations - irrespective of the background of the owner. 

Lenders tend to favor established businesses with a solid track record and operations that bring in sufficient cash flow to facilitate loan repayments. This often rules out startup businesses. Yet, don’t despair. You can still find finances for your new minority-owned business. 

For example, business credit cards could offer financing for minority business owners seeking working capital or those that are just starting out.

See Our Additional Guides on Business Loan Types

The Bottom Line

This guide has covered the top small business loans and SBA loans. We have also discussed our loan of choice for minority business owners - OnDeck. You now have the information you need when applying for a minority business grant and black minority business grants.

Please also refer to the Minority Business Development Agency for any further information you as a minority small business owner may require. Just click here.